Good News is Retroactive

The media, your children, your hairdresser or barber, your neighbor and your crazy aunt have probably all warned you about the dire consequences of even thinking about a reverse mortgage.  They were all sure that you would lose title to your home and that the bank would keep all the equity when you die.  Those are just a couple of examples of the myths that my industry continues to overcome through education.  One calamity that was not a myth has recently been addressed and solved.


Despite signing several documents acknowledging that a homeowner (usually a spouse) under the age of 62 at loan origination would have to pay off the reverse mortgage loan balance or leave the home upon the death of the age-eligible homeowner, the reality of that actually happening became the stuff of lawsuits.  AARP filed on behalf of widows and widowers forced by the loan terms to leave the home.  The agreement was clear and the papers were signed, but who wants to toss an elderly widow out on the street?  No one, of course!  Not even the big bad bank.  But the HUD rules were clear.  Only those age 62 or older at loan origination had a lifetime pass to stay in the home.  It created quite a dilemma!  AARP won and now the HECM is even more friendly.

Whenever I take an application for a HECM (Home Equity Conversion Mortgage), I am still struck, even after several years’ worth of applications, with the extraordinary protections and clear favoritism for the borrower, not the lender.  Over a lifetime (one that more than qualifies me as eligible for a HECM!), I have signed many contracts, mortgages, agreements, etc.  None of them compares to the consumer friendly language in a HECM.  It is truly the reverse (pun intended) of my life experience.  And yours, I bet.

I say that to say that when the issue of the non-borrowing spouse (NBS) came to the fore, as well it should have, the reaction by HUD and the industry was the same:  Protect the Senior Citizens.  So you will see from the linked article that beginning August 4, 2014, new HECM loans contained protection for the younger NBS.  They could then be an “eligible” NBS and remain in the home for their lifetime.  Just this month, June 2015, the protection was extended to include a NBS on loans issued previously.  Thus, in the spirit of consumer protection that is paramount for this financial tool, this very important protection can now be retroactive!

Go and tell the media, your children, your hairdresser or barber, your neighbor and your crazy aunt that this deal is not too bad.  It’s all about doing the right thing for seniors.  You can see a summary from here.